![]() Exhibit 99.1 |
![]() 2 © 2013 Mercury Systems, Inc. Forward-looking safe harbor statement This presentation contains certain forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995, including those relating to business performance and the Company’s plans for growth and improvement in profitability and cash flow. You can identify these statements by the use of the words “may,” “will,” “could,” “should,” “would,” “plans,” “expects,” “anticipates,” “continue,” “estimate,” “project,” “intend,” “likely,” “forecast,” “probable” and similar expressions. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. Such risks and uncertainties include, but are not limited to, continued funding of defense programs, the timing of such funding, general economic and business conditions, including unforeseen weakness in the Company’s markets, effects of continued geopolitical unrest and regional conflicts, competition, changes in technology and methods of marketing, delays in completing engineering and manufacturing programs, changes in customer order patterns, changes in product mix, continued success in technological advances and delivering technological innovations, changes in the U.S. Government’s interpretation of federal procurement rules and regulations, market acceptance of the Company's products, shortages in components, production delays due to performance quality issues with outsourced components, inability to fully realize the expected benefits from acquisitions and restructurings or delays in realizing such benefits, challenges in integrating acquired businesses and achieving anticipated synergies, changes to export regulations, increases in tax rates, changes to generally accepted accounting principles, difficulties in retaining key employees and customers, unanticipated costs under fixed-price service and system integration engagements, and various other factors beyond our control. These risks and uncertainties also include such additional risk factors as are discussed in the Company's filings with the U.S. Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended June 30, 2012. The Company cautions readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made. Use of Non-GAAP (Generally Accepted Accounting Principles) Financial Measures In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, the Company provides adjusted EBITDA and free cash flow, which are non-GAAP financial measures. Adjusted EBITDA excludes certain non- cash and other specified charges. Free cash flow is defined as cash flow from operating activities less capital expenditures. The Company believes these non-GAAP financial measures are useful to help investors better understand its past financial performance and prospects for the future. However, the presentation of adjusted EBITDA and free cash flow is not meant to be considered in isolation or as a substitute for financial information provided in accordance with GAAP. Management believes the adjusted EBITDA and free cash flow financial measures assist in providing a more complete understanding of the Company’s underlying operational results and trends, and management uses these measures along with the corresponding GAAP financial measures to manage the Company’s business, to evaluate its performance compared to prior periods and the marketplace, and to establish operational goals. A reconciliation of GAAP to non-GAAP financial results discussed in this presentation is contained in the Appendix hereto. |
![]() 3 © 2013 Mercury Systems, Inc. Introducing Mercury Systems • MRCY on NASDAQ • Real-time image, signal, Big Data processing subsystems • Commercial Item company; unique business model • Focused on Defense and Intelligence priorities • Deployed on ~300 programs with 25+ Primes • FY12 $245M revenues; 20% Adj. EBITDA margin. 770+ employees • Defense revenue 76% growth (15% CAGR) FY08–FY12 Best-of-breed provider of sensor and Big Data processing solutions |
![]() 4 © 2013 Mercury Systems, Inc. Defense industry environment will remain challenging … due to budget and political uncertainty |
![]() 5 © 2013 Mercury Systems, Inc. Mercury investor highlights Pure-play C4ISR electronics company embedded on a diverse mix of programs and platforms aligned with existing and emerging priorities Best-of-breed provider of open sensor and Big Data processing subsystems to defense Primes and to the Intelligence Community Increased ISR use, shift to onboard processing / exploitation, new EW threats and Big Data driving greater demand for Mercury solutions Well positioned to benefit from DoD procurement reform and slower defense spending, which are increasing outsourcing by defense Primes Well-defined strategy with a demonstrated track record of double-digit defense revenue growth and improved profitability Successful transformation has positioned the business for rebound in organic growth supplemented through strategic acquisitions |
![]() 6 © 2013 Mercury Systems, Inc. 1. Expand our capabilities and offerings for sensor and Big Data processing 2. Grow business by sensor modality and within the Intelligence Community 3. Penetrate customers, programs and platforms through new design wins 4. Capitalize on Prime outsourcing and supply chain consolidation 5. Acquire to scale our sensor processing and intelligence businesses Growth strategy summary Mercury has strategically positioned its business to grow |
![]() 7 © 2013 Mercury Systems, Inc. We are the only commercial item company with the end-to-end capabilities and differentiated technology … … to build today’s sophisticated sensor processing subsystems targeting new platforms or upgrades |
![]() 8 © 2013 Mercury Systems, Inc. EW EW Radar Radar … drive demand for our onboard sensor processing solutions Increased demand for ISR and rapidly evolving threats … • More and better sensors. Overwhelming data. • EW: new and rapidly evolving threats • Radar: smaller, faster targets. New technologies • EO/IR: leap in resolution, onboard exploitation and real-time tactical access • C4I: Net-centric command, control and collaboration • Time to actionable intelligence key C4I C4I EO/IR EO/IR |
![]() 9 © 2013 Mercury Systems, Inc. We are deployed on 300+ programs with 25+ Primes RADAR EW EO/IR – C4I BAMS; NATO AGS Global Hawk BAMS; NATO AGS Global Hawk SEWIP SEWIP AEGIS AEGIS Ashore AEGIS AEGIS Ashore F-15 F-15 Patriot Patriot AH-64 Apache AH-64 Apache Reaper Gorgon Stare Reaper Gorgon Stare F-16 F-16 Badger/Buzzard Badger/Buzzard Shadow Shadow Global Hawk Global Hawk F-35 F-35 F-35 F-35 F-16 F-16 P-8 P-8 |
![]() 10 © 2013 Mercury Systems, Inc. Mercury’s largest single program in production to date Aegis ballistic missile defense: SPY-1 BMD Radar Countering rogue nations’ ballistic missile threats • Highest performance radar processor Application Ready Subsystem • $16M booked in FY13, $102M+ booked to date • Additional 15 ship sets expected through GFY16 • AMDR selection in FY13 – SPY-1 replacement Radar – FY16 introduction expected – Partnering with LM |
![]() 11 © 2013 Mercury Systems, Inc. Strong partnership with Prime driving Mercury content expansion SEWIP: Countering new emerging peer threats Delivered best-of-breed RF, microwave and digital receiver subsystems • Naval surface fleet EW upgrade: 100+ ships • Block 2: – Upgrade to AN/SLQ-32 passive detection – Opportunity to expand through LNX & Micronetics – Entered LRIP; production expected GFY15 • Block 3: – Electronic attack – Lockheed and Raytheon partnering – Upside opportunity due to strategic supplier relationship with Lockheed on Block 2 |
![]() 12 © 2013 Mercury Systems, Inc. Foreign Military and US Army potential upgrades driving growth Patriot missile defense: Next-generation ground radar Services-led design win – Prime outsourcing example • Sophisticated radar processor Application Ready Subsystem • Production awards received to date: $41M – UAE, Taiwan, Saudi Arabia • Potential future FMS awards – Up to 15 countries including Kuwait, Qatar and Turkey etc • US Army Patriot upgrade – First PO received for US Army |
![]() 13 © 2013 Mercury Systems, Inc. Mercury Program Value Drivers Program Remaining Potential Value Event Timing AMDR * $300M - $375M Sole-source engineering development contract 2H CY13 SEWIP Block 3 * $100M - $165M Sole-source engineering development contract Q4 CY13 to Q1 CY14 F-16 AESA Radar Upgrade* $40M - $120M -FMS (Taiwan & Singapore) -US Air Force 2H CY13 2H CY13 E-2D Advanced Hawkeye * $35M - $105M Authorization for Full Rate Production Authorized: Q1 CY14 Patriot US Army $50M Full Rate Production contract CY14 Note: Potential values and timing reflect Management’s current estimates and are subject to change. *Programs are currently being competed among multiple primes. |
![]() 14 © 2013 Mercury Systems, Inc. Embedded computing consolidation Primes reducing in-house engineering while consolidating supply chain for subsystem design & integration Primes retaining platform system design & integration RF component / assembly consolidation Mercury has strategically positioned its business to help Outsourcing by large defense Prime contractors could substantially increase our market opportunity • Reduce risk given firm-fixed price contracts • Address high-fixed cost operating model • Increase success rate on new programs and production recompetes • Develop differentiated, more affordable solutions with fewer internal R&D dollars • Compress upgrade development and deployment cycles • Consolidate supply base at subsystem level |
![]() 15 © 2013 Mercury Systems, Inc. Exploitation and Fusion Tailored feeds directly to field forces or ECM RF acquisition targets: RF transmitters / receivers Power amplifiers Synthesizers DRFM Through acquisition we have created a unique, scalable microwave, RF and digital solutions platform We view our market opportunity as providing end-to-end, open sensor processing subsystems to the Primes Sensor Processing Chain |
![]() 16 © 2013 Mercury Systems, Inc. Well positioned for market rebound • Focused on important defense and intelligence priorities • Well positioned on key programs and platforms • Capabilities help address today’s and tomorrow’s threats • Business model aligned with defense procurement reform • Outsourcing partner to Primes for open sensor subsystems • Pursuing acquisitions, when end market conditions improve, to gain additional capability and scale |
![]() TM © 2013 Mercury Systems, Inc. Financial Overview |
![]() 18 © 2013 Mercury Systems, Inc. Revenue summary by market Defense revenue CAGR of 15% FY08-FY12 Notes: • FY08-10 figures adjusted for discontinued operations. |
![]() 19 © 2013 Mercury Systems, Inc. Adjusted EBITDA more than doubled FY08-FY12 Notes: • FY08-FY09 figures are as reported in the Company’s fiscal 2010 Form 10K. FY10-12 figures are as reported in the Company’s fiscal 2012 Form 10K. • Adjusted EBITDA excludes interest income and expense, income taxes, depreciation, amortization of acquired intangible assets, restructuring expense, impairment of long-lived assets, acquisition and other related expenses, fair value adjustments from purchase accounting, and stock-based compensation costs. |
![]() 20 © 2013 Mercury Systems, Inc. Achieved historic target business model in FY12 GAAP FY08 FY09 FY10 FY11 FY12 Target Business Model Revenue 100% 100% 100% 100% 100% 100% Gross Margin 58% 56% 56% 57% 56% 54+% SG&A and other OPEX (1) 37% 29% 27% 26% 25% Low-mid 20’s R&D 24% 22% 21% 19% 19% High Teens Operating Income (3%) 4% 9% 11% 12% 12-13% Adj. EBITDA 12% 12% 15% 18% 20% 17-18% (1) Other OPEXincludes Amortization of Acquired Intangible Assets, Impairment of Goodwill and Long Lived Assets, Change in the fair value of the liability related to the LNX earn-out, Restructuring, Gain on Sale of Long Lived Assets, and Acquisition Costs and Other Related Expenses. |
![]() 21 © 2013 Mercury Systems, Inc. Healthy balance sheet with sufficient liquidity No debt and expanded credit facility • $500M Shelf Registration • $200M senior unsecured revolving line of credit (no drawdowns) Other financing sources available |
![]() 22 © 2013 Mercury Systems, Inc. Defense industry conditions are currently challenging • Adversely impacting FY13 financial results • Restructuring lead to $25M of recurring annualized savings • Forecasting conservatively • Focused on managing controllable items to preserve liquidity • Improving FY13 second half financial outlook Substantial operating leverage when defense market rebounds |
![]() 23 © 2013 Mercury Systems, Inc. Q4 FY13 guidance (as of April 30, 2013) Notes: (1) The guidance included herein is from the Company’s earnings release and is as of the date of the earnings release. The Company is neither reconfirming such guidance as of the date of this presentation nor assuming any obligations to update or revise such guidance. Q3 FY13 Actual Quarter Ending June 30, 2013 Low High Revenue $54 $48 $54 GAAP EPS (Continuing) $0.03 ($0.13) ($0.07) Adj EBITDA $5.2 $0.1 $3.0 Note - Adj EBITDA Adjustments: Net income (Continuing) 0.8 (4.0) (2.2) Interest (income) expense, net 0.0 0.0 0.0 Income tax (benefit) expense (2.2) (2.1) (1.0) Depreciation 2.1 2.1 2.1 Amortization of acquired intangible assets 2.3 2.3 2.3 Restructuring expenses 0.2 0.0 0.0 Fair value adjustments from purchase accounting 0.1 0.0 0.0 Stock-based compensation cost 1.9 1.8 1.8 Adj EBITDA $5.2 $0.1 $3.0 (1) |
![]() 24 © 2013 Mercury Systems, Inc. Guidance: Strong performance track record Notes: (1) The guidance included herein is from the Company’s earnings release and is as of the date of the earnings release. The Company is neither reconfirming such guidance as of the date of this presentation nor assuming any obligations to update or revise such guidance. Q1 Q2 Q3 Q4 Reported Guidance Reported Guidance Reported Guidance Reported Guidance 2008 Revenue ($M) 49.2 48.0 52.6 51.0 56.5 53.0-55.0 55.2 53.0-56.0 EPS ($) 0.09 (0.08) 0.04 (0.05) 0.04 (0.04)-0.00 0.01 (0.05)-0.01 2009 Revenue ($M) 49.1 47.0-49.0 50.7 47.0-49.0 50.6 48.0-50.0 48.4 46.0-48.0 EPS ($) 0.07 (0.07)-(0.03) 0.03 (0.05)-0.00 0.20 0.05-0.09 0.13 0.05-0.08 2010 Revenue ($M) 47.4 43.0-45.0 45.2 40.0-42.0 43.6 41.0-43.0 63.6 58.0-60.0 EPS ($) 0.19 0.03-0.08 0.08 (0.08)-(0.04) 0.16 (0.15)-(0.11) 0.77 0.25-0.28 2011 Revenue ($M) 52.1 48.0-50.0 55.5 54.0-55.0 59.9 58.0-60.0 61.2 57.0-59.0 EPS ($) 0.16 0.03-0.06 0.22 0.10-0.12 0.20 0.16-0.18 0.14 0.11-0.13 2012 Revenue ($M) 49.1 54.0-56.0 68.0 67.0-69.0 67.0 65.0-68.0 60.9 60.0-66.0 EPS ($) 0.09 0.10-0.12 0.30 0.24-0.27 0.17 0.09-0.11 0.19 0.04-0.10 2013 Revenue ($M) 49.4 51.0-57.0 49.8 43.0-49.0 54.1 44.0-50.0 48.0-54.0 EPS ($) (0.24) (0.05)-0.00 (0.16) (0.24)-(0.17) $0.03 (0.08)-(0.02) (0.13)-(0.07) (1) (1) |
![]() ![]() ![]() 25 © 2013 Mercury Systems, Inc. Updated business model raises Adjusted EBITDA target In a more normalized industry environment (1) Other OPEX includes, Impairment of Goodwill and Long Lived Assets, Change in the fair value of the liability related to the LNX earn-out, Restructuring, Gain on Sale of Long Lived Assets, and Acquisition Costs and Other Related Expenses. (2) Amortization includes fair value adjustment from purchase accounting and $4.9M LNX earnout reversal in FY12. GAAP FY12 Historic Target Business Model Revenue 100% 100% 100% Gross Margin 56% 54+% 45-50% SG&A and other OPEX (1) 25% Low-mid 20’s Low 20’s R&D 19% High Teens 11-13% Amortization (2) 0% — 2-3% Operating Income 12% 12-13% 12-13% Adj EBITDA 20% 17-18% 18-22% Current Target Business Model Current Target Business Model |
![]() 26 © 2013 Mercury Systems, Inc. Financial summary • 15% Defense revenue CAGR FY08-FY12 • Profitability restored and improved through FY12 • Healthy balance sheet; zero debt; $200M revolving credit facility • Exceeded historic target model in FY12; new targets established (for a more normalized industry environment) • Reduced cost structure in response to challenging industry environment • Substantial operating leverage when industry conditions improve |